Kurds suspend oil exports over dispute

Baghdad, December 26, 2012

An Iraqi Kurdish official said the country's self-ruled northern Kurdish region has suspended oil exports over a payment row with Baghdad, a development that could add to souring relations between the Kurds and the central government.

Since the 2003 US-led invasion, the Kurds have struck more than 50 deals with foreign oil firms, even though Baghdad says they have no right to do so.

In 2011, both reached a tentative deal by which the Kurds send the oil to Baghdad, which sells it and pays 50 per cent of the revenues to the developers to reimburse the development costs.

In April, the Kurds halted exports of around 100,000 barrels per day (bpd), saying Baghdad had made only two payments and failed to pay $1.5 billion they were owed.

Four months later, the Kurds agreed to restart exports as a goodwill gesture. That allowed both sides to reach a new deal under which Baghdad would pay one trillion dinars (about $848 million) to the companies in September.

However, Kurdish Ministry of Natural Resources adviser Ali Hussein Balo said Baghdad sent only 650bn dinars and withheld the rest. That prompted the Kurds' latest move.

"The region has found itself forced to halt oil exports as Baghdad didn't fulfil a commitment it made in the September agreement in regard to payment," Balo said.

He said the region was exporting around 180,000 bpd before recently starting to decrease shipments.

A spokesman for Iraq's deputy prime minister for energy affairs confirmed that the full amount wasn't paid and said payments were suspended because the Kurds were pumping less than the 200,000 bpd they had pledged.

Iraq sits atop the world's fourth largest proven reserves of conventional crude, about 143.1bn barrels, and oil revenues make up 95 per cent of its budget.

Iraq and neighbouring Jordan have agreed to speed up efforts to build a pipeline to export Iraqi oil through the Jordanian Red Sea port of Aqaba. The pipeline will have a capacity to export 1m bpd.-Reuters